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Large U.S. stocks fell more dramatically last week than in any other week this year, as weakness in China, middling U.S. economic data, a drop in commodity prices and a terrorist attack in Boston spooked investors.

A week after the Dow flirted with 15,000, the index retreated. It ended the week down 317.55 points, or 2.1%, at 14,547.51. That marks the index's worst week since June 1, 2012. The S&P 500 fell 33.6 points, or 2.1%, to 1,555.25. The Nasdaq fell 88.89 points, or 2.7%, to 3,206.06.

There were few safe U.S. assets for investors to reach for—gold futures fell $105, or 7%, to $1,395 per ounce. Silver tumbled 13%. And 10-year Treasuries were basically flat, yielding about 1.71% at the end of the week.

The trouble started on Monday, after China reported that first-quarter growth in gross domestic product (GDP) decelerated to 7.7% from 7.9%; investors had expected the country to grow its GDP at a rate faster than 8%. That data, along with spotty U.S. economic reports, sapped confidence in a market that has been running on easy money and optimism.

"Put those factors together and you start to worry we're getting a replay of that movie we've seen the last couple years, 'The Summer Swoon,'" said Mark Luschini, chief investment strategist at Janney.

"The market lift wasn't on the back of good earnings, it was on multiple expansion," Luschini said. "And now if we aren't getting follow-through on earnings, what's left to support the expanded P/E multiples?"

Luschini added: "I do think we're in the midst of a growth scare."

The slowdown may have actually begun last month. Since March 15, the S&P 500 has closed lower on more than half of all trading days, notes Michael O'Rourke, the chief market strategist at Jones Trading. "Concerns are rising that the sequester and the payroll-tax increase are starting to exert some influence."

It's not clear, however, that the market's slump this week is indicative of a sustained shift in sentiment. After Monday—the day China released its results and terrorists killed three people at the Boston Marathon—indexes traded flat for the rest of the week. The S&P 500 has held above 1538, a key technical support level, after briefly dipping below.

Luschini doesn't think investors need to go into a defensive crouch, although they may want to maintain a significant cash position. They should stay away from defensive stocks, like consumer staples, health care, and utilities, which have been bid up considerably. "They have very little valuation support," he says. Instead, it's worth taking a risk on cyclical industries such as materials and industrial and some technology stocks, which have lagged and could make a run in the second half of the year as economic data improve.

"They should be the beneficiaries of better global growth in the second half and [more] business spending," Luschini says, "if we see some sturdiness in the economy, which I do think is going to happen."

COMMODITIES LED THE MARKET lower last week, and companies dependent on commodity prices were punished in the selloff. Energy stocks in the S&P 500 fell 4.1% on the week, but not all suffered equally. Integrated oil companies, for instance, fell 2% to 3%, while several oil-service companies plunged more than 7%. Shares of service and equipment companies tend to fall harder when oil prices drop because investors worry that energy producers will call off projects and put the service companies out of work. Integrated companies, meanwhile, have a diverse array of businesses that can cushion the blow of lower commodity prices.

When stocks fall in tandem, regardless of fundamentals, opportunities often arise. "The crude weakness has led to widespread—and, in our view, indiscriminate—selling of oil-service stocks," wrote Sterne Agee analyst Stephen Gengaro in a note last week. "Interestingly, with over 75% of the U.S. rig count currently oil-targeted, we can at least understand the weakness in U.S. land-focused service companies as activity could be impacted if oil-price weakness persists. On the other hand, the rapid sell-off in deepwater names where activity levels are significantly more durable seems overblown."

Brian Lazorishak, co-manager of the Chase Mid-Cap Growth fund, says deepwater service and equipment companies tend to operate on longer-term contracts, and those contracts are unlikely to be canceled when the price of oil falls. "A couple of dollars' fluctuation in crude doesn't really change that," he says.

Since the Deepwater Horizon explosion in April 2010, demand for ROVs to complete safety inspections has jumped, as have Oceaneering's earnings. The company's earnings have grown at a cumulative rate of 16% in the past three years, but analysts expect them to grow more than 20% this year and next.

Oceaneering's shares fell about 7% last week along with other energy names. The stock now trades at about 18 times forward earnings; that's a premium to other oil-and-gas equipment companies, but it's justified by the company's faster growth rate. Oceaneering has regularly traded at more than 20 times future earnings estimates in the past year.

There are few indications that demand is slipping for deep-sea equipment. Oceaneering's subsea-equipment backlog grew by 78% in 2012. And rigs are proliferating in the Gulf:
SchlumbergerSLB -0.8381226053639846%Schlumberger Ltd.U.S.: NYSEUSD82.82
-0.7-0.8381226053639846%
/Date(1438376569843-0500)/
Volume (Delayed 15m)
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5284829AFTER HOURSUSD82.82
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Volume (Delayed 15m)
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283801
P/E Ratio
24.648809523809526Market Cap
104804483690.964
Dividend Yield
2.414875633904854% Rev. per Employee
371208More quote details and news »SLBinYour ValueYour ChangeShort position
(SLB) announced on Friday that the number of deepwater rigs in the Gulf grew by more than 30% year-over-year in the first quarter. Earnings growth for Oceaneering is "the most visible and durable" among its peers, Gengaro says. Companies pay about $10,000 per day to use a remote vehicle, and those costs don't tend to be the first ones they cut when oil prices fall.

Oil would have to drop to $70 for Oceaneering's outlook to change, argues Lazorishak. Crude futures fell to $88.01 on Friday.

BANKS HAD A VERY UNSEXY week as they released their first-quarter earnings results. "Morgan Stanley Slowly Approaching Its Goal of Becoming Boring," read the headline of a story on the website Dealbreaker last week.

For most banks, credit keeps getting better and costs are falling, but revenue growth is hard to come by. Banks are getting squeezed by low net interest margins because of rock-bottom interest rates. Trading and loan growth are both sluggish. And while Wall Street had hoped for a mergers and acquisitions boom this quarter after Warren Buffett and 3G Capital agreed to buy Heinz, that boom never quite materialized. Announced M&A volumes were down 37% sequentially, according to Goldman Sachs.

But the people who have been waking up at 7 a.m. to listen to earnings calls still think the banks are buzzworthy—and despite their stocks' huge run in the past few years, there are still reasons they could rise even more.

"You can buy them at a discount to book value, which is all in cash," Bove says.

Citigroup's stock closed at $45.03 on Friday, a 39% discount to its per-share book value of $62.51 as of the end of the first quarter. Citi's balance sheet arguably is the strongest among the big banks now, says Nomura analyst Glenn Schorr. That's a remarkable turnaround given the bank's disastrous record during the recession. Citi released more than $600 million that had been held in loan-loss reserves as its loan delinquencies fell. Its net income rose 30% year over year.

"They have extremely high capital ratios relative to other big banks," says Schorr, referring to the bank's Tier 1 Common ratio, a measure of a bank's financial strength. Although Citi isn't expected to raise its dividend this year, next year could be different. In fact, if Citi earns more than $5 per share next year, and pays out 30% in dividends—"the going rate for good banks," according to Schorr—its dividend yield would be above 3%. That would put it in the top quartile of all dividend payers in the S&P 500, he says.

"Citi has the potential to be a top dividend-payer next year," he says.